Lufthansa has its first capital markets day yesterday since 2011 and it’s the first I’ve attended in person as an investor. The event was held at the rather amazing Lufthansa Training Facility at Frankfurt.
While there was a lot of relatively unimportant talk as there always is, and more than a few stupid questions from people who should know better, Eurowings was the story that stood out.
Carsten Spohr outlined the issues around integrating the AirBerlin fleet, which had proven to be far more difficult and expensive than expected. He also pointed out that easyJet and RyanAir had had their own issues doing the same, and my contact at easyJet had told me that months ago, by way of verification.
The biggest changes however were the following:
- Eurowings will end all long haul operations as soon as possible. Current obligations for the summer season will be finalised, future bookings ceased.
- All non-A320 aircraft will be removed from the fleet as soon as is operationally viable. Going forward the airline will only operate a single type.
- The integration of Brussels Airlines into Eurowings will end and be reversed leaving it a separate business unit.
It was only back in March-April that Eurowings long haul operations were being expanded, so that’s a radical departure. Part of the issue is cannibalised flights, with one brand taking passengers from another, it’s making neither any money.
The long haul operations will be dealt with in future from the various group fleets.
However this may have other implications – with Lufthansa bidding on Thomas Cook-Condor that airline would easily cover off any lower cost long haul, and Eurowings has been competing against it. That would be superfluous. So I’m expecting a positive bid outcome any day now.
It’s hard to equate an issue that can best be described as a ‘first world problem’: Eurowings staff think that they’re hard done by, and in German terms, they’re not the highest paid. In European terms they’re generously reimbursed. Compared to the US and Asia they’re extraordinarily well off in terms of pay and benefits.
Lufthansa is expecting a Eurowings cabin crew strike, but it can be avoided. It has to be, as productivity and cost cutting are now important mantras at the airline, as it has to compete against the other LCC’s.
The Eurowings brand has a lot going for it. If I have to use an LCC then Eurowings is the one to beat, ticket structures are good although they’ve recently been modified to a pay-for-all-food model. The aircraft are clean and modern and crews efficient and pleasant.
Frankly, with AF-KLM seemingly unable to compete in the market with Transavia, something needs to go up against easyJet, RyanAir, Vueling and Wizz. And the one thing with Lufthansa is they always make things work or they dump them remorselessly.